Do You Know Your Mortgage Reinstatement Rights?

What is Mortgage Reinstatement?

By definition, a mortgage reinstatement is restoring a loan after the lender files foreclosure against the borrower who never made payments, even after the given grace period. During the process of foreclosure, the lender will deactivate the non-paid loan until a trustee sale. Prior to a trustee sale, the borrower can still reinstate the mortgage loan up to five days before the foreclosure auction.

Beware Of Indiabulls Home Loan

In order to accomplish a mortgage reinstatement, the borrower must bring their mortgage note current and pay only with "good funds" the delinquencies including other fees and charges. Once received, the lender will return the loan back into active status.

However, this happens under statutory regulation. In most states, borrowers have the right to reinstate their mortgage before the trustee sale, like for example in California and Oregon. Unfortunately borrowers living in Georgia cannot reinstate their mortgage before the trustee sale.

Foreclosure and the right of reinstatement

On mortgage defaults under a promissory note and deed of trust, the lender has the selection to:

Exercise the power of sale clause in the deed of trust and file a consideration of foreclosure against the borrower to the trustee. acquire the note due, accelerate cost of the whole mortgage estimate and embark on judicial foreclosure.

Typically, lenders prefer foreclosure by a trustee sale because it is hassle-free and less expensive. As a borrower you must know your statutory ownership when this happens. There is easily a reinstatement law that applies to both options such that:

Under Arizona Revised Statute Section 33-813(A), the borrower is obligated to pay only "the whole estimate then due..., other than the portion of the indispensable as would not then be due had no default occurred..." Meaning, the borrower (trustor) may reinstate their mortgage (or fix the default under the promissory note) by paying the lender the delinquent dues only, contrary to the reliance that the borrower must pay the whole loan estimate in order to fix the default and reinstate their mortgage.

In addition, Chapparral improvement v. Rmed Intern, 170 Ariz. 309, 823 P.2d 1317 (App. 1991), the Arizona Court of Appeals ruled that under A.R.S. Section 33-813(A), a borrower (trustor) has an absolute right to a mortgage reinstatement regardless if a lender forecloses by trustee's sale or judicially. The inequity is:

In judicial foreclosure, a borrower's right of reinstatement is cut off once a foreclosure performance is files and the borrower must pay the whole estimate owed on the promissory note. In the context of a trustee's sale, the borrower can reinstate up until 5:00pm on the day prior the date of the auction. However, their mortgage reinstatement ownership will be extinguished once the sale is held.

Do You Know Your Mortgage Reinstatement Rights?